The Commission was called by then Canadian Prime MinisterPaul Martin in February 2004 soon after a report by the Auditor General of Canada found unexplainable irregularities in the Sponsorship Program. Justice Gomery released his Phase I Report[1] on the scandal on November 1, 2005 and Phase II Report[2] on February 1, 2006.

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The Commission had a broader mandate, more power and greater resources than the Auditor General, and most importantly could look beyond government to the advertising agencies that had received the Sponsorship dollars. The terms of reference allowed the commissioner to question witnesses, hire experts and adopt any procedures or methods that he considers expedient for the proper conduct of the inquiry. The purpose given was to "investigate and report on questions raised, directly or indirectly" by the Auditor General's report. However, as is typically the case in commissions of inquiry, he was specifically directed not to make any conclusions or recommendations on criminal charges or civil liability.

Commissioner Gomery was given a two part mandate with power issued to him under the Inquiries Act. The first part of the mandate was investigate and report on questions and concerns addressed in the 2003 Report of the Auditor General of Canada relating to the sponsorship program and advertising activities of the Government of Canada. These concerns included the program’s creation, the selection of agencies, the program’s management and activities, the receiving and use of funds and disbursement of commissions, and anything else that Gomery feels relevant.

The second part of the mandate was for Gomery to make any recommendations that he considers advisable, based on his findings. Specifically requested of Gomery were the following: to prevent mismanagement of sponsorship or advertising programs in the future, taking into account legislation to protect "whistleblowers"; to recommend changes to legislation to change the governance of Crown corporations to ensure that audit committees are strengthened, that public access to information is increased, that there is a consistent application of the provisions for each organization, that compliance and enforcement be enhanced, and finally that respective responsibilities and accountabilities of Ministers and public servants as recommended by the Auditor General of Canada.

The Commission began in Ottawa, meeting in the Old City Hall. The hearing opened in September 2004. The first to testify was Auditor General Sheila Fraser who reported the findings of her earlier investigations. The first part of its investigation was of the political direction of the project. Most of the top officials involved were called to testify.

In an unprecedented event, the inquiry saw the testimony of two Prime Ministers in February 2005: Paul Martin and Jean Chrétien. The testimony of Chrétien was much anticipated. In December 2004, Chrétien's lawyers had moved to expel Justice Gomery due to comments he had made to a National Post reporter that the lawyers argued showed that Gomery was biased against Chrétien. These included Gomery commenting that golf balls marked with Chrétien's name, which had been paid for by the sponsorship program, were "small town cheap." Gomery rejected the calls to recuse himself setting up a confrontation between him and Chrétien. At the end of his day of testimony Chrétien closed his statement by pulling out a series of golf balls bearing the name of American presidents and asking whether each of them was "small town cheap". The stunt was the focus of all the media reports.

After the prime ministers testified, the hearings moved to Montreal to investigate where the money had gone. The hearings in Ottawa had uncovered little more than what was in the Auditor General's report. The AG did not have the authority to investigate outside of the government, and the look into the advertising companies in Montreal uncovered a great deal of new and explosive allegations. The most important of these were by Groupaction executive Jean Brault who recounted a series of crimes committed to direct government money to Liberal party supporters. These caused a sharp fall in the support for the governing Liberals, and put their government in jeopardy.

On November 1, 2005, Gomery released the Phase I Report.[1] Gomery criticized Chrétien and his chief of staff Jean Pelletier but cleared them of direct involvement in kickback schemes. While people such as Alfonso Gagliano, Chuck Guité and Jacques Corriveau took advantage of the programme, Gomery argued that abuses would not have occurred had Chrétien set the programme with safeguards in place. Gomery said that Pelletier "failed to take the most elementary precautions against mismanagement – and Mr. Chrétien was responsible for him."

Gomery also exonerated Prime Minister Paul Martin, the minister of finance during most of the sponsorship programme. Gomery specifically said that Martin "is entitled, like other ministers from the Quebec caucus, to be exonerated from any blame for carelessness or misconduct", as the Department of Finance's role was not oversight, but setting the "fiscal framework".

On February 1, 2006, Gomery released his final report consisting mostly of recommendations for changes to the civil service and its relation to government.[2]

The recommendations suggested include:

Moving more responsibility to Parliamentary committees

Stiffer penalties for violation in public spending legislation

De-politicize civil service and crown corporation appointments

More transparency with allocation of reserve funds

Ban on destruction of documents

Shortly after Justice Gomery held a press conference, Prime Minister-designate Stephen Harper, elected on January 23, 2006, told the press that some of the Commission's recommendations matched his proposed first bill, the Federal Accountability Act. Other recommendations went further than what Harper promised, while some other recommendations (dealing with the public service) would not be enacted in the short term.

Many commentators criticized the report for various reasons: alleged bias on the part of the commission, the terms of reference with which it was set up, and the use of evidence in the report. Several, including former Prime Minister Jean Chrétien, Warren Kinsella, and former cabinet minister Sheila Copps, criticized the commission as being little more than an extension of Liberal partyinfighting.[3]

Gomery was accused by some as being friendly to Paul Martin, and hostile toward Chrétien, and Chrétien's lawyers attempted unsuccessfully to have Gomery removed due to his alleged bias. The two men had long represented a power struggle within the party. Subsequent to the release of the first report, Chrétien took action in Federal Court to review the commission report on the grounds that Gomery showed a "reasonable apprehension of bias", and that some conclusions didn't have an "evidentiary" basis. [4]

Jean Chrétien's lawyers stated that Gomery has made many comments which indicate he had a bias going into the investigation such as comments Gomery made calling Chrétien "small town cheap", referring to the management of the sponsorship program as "catastrophically bad," and calling Chuck Guité, a "charming scamp".

Other allegations of bias concern the commission's chief counsel, Bernard Roy, a former chief of staff to former Progressive Conservative Prime Minister Brian Mulroney. Roy is also a partner in Mulroney's law firm where Gomery's daughter works. Chrétien's lawyers stated that the appointment is a conflict of interest. Roy is a longtime personal friend of the former prime-minister's. [5] Brian Mulroney and Jean Chrétien have had an adversarial personal relationship in recent years since the Airbus affair. The choice of counsel may account for the failure to call some Chrétien friendly witnesses.

During spring 2005, Chrétien legal team made a request to have Gomery removed but it was denied.

Conservative leader Stephen Harper was sympathetic to Chrétien's complaints of bias, stating that the main problem was that the commission's terms of reference did not allow it to investigate Paul Martin's contracting habits as finance minister. Other criticisms concern the lack of powers the commission had to investigate criminal matters, which were being investigated by the RCMP.

Chrétien's lawyers have indicated they are concerned about conclusions which are not based on evidence, but mere extrapolation. Jean Chrétien, on the day the report was tabled in the House of Commons, objected to the findings of the Commission, commenting that Gomery believed the wrong witnesses. "Personally, I believe Jean Pelletier, a man who dedicated his life to the service of his city, his province and his country," said the former Prime Minister, dismissing's Chuck Guité's testimony. Chrétien believes that Gomery's conclusion that the programme was run out of the prime minister's office is wrong.

Subsequent to the release of the first report, Chrétien's lawyers took action in Federal Court to invalidate the report and clear his name. They want the court to review the commission report on the grounds that Gomery showed a "reasonable apprehension of bias", and that some conclusions didn't have an "evidentiary" basis.[4]

On June 26, 2008, the Federal Court quashed the Gomery inquiry's conclusions that Chrétien and Pelletier bore responsibility for the sponsorship scandal. Justice Max Teitelbaum criticized Gomery for having a preoccupation with the media spotlight that led him to give interviews he should have eschewed, making comments that indicated he judged issues before all evidence was heard, exhibited bias against Mr. Chrétien, and trivialized the inquiry proceedings. For instance, Teitelbaum pointed out that Gomery's remark halfway through the hearings that "juicy stuff" was yet to come made it appear that evidence of wrongdoing was expected before it was heard. The federal judge also ruled that Gomery's comments on "small town cheap" amounted to a personal insult against Chrétien. The federal government was ordered to pay Chrétien's legal costs. Chrétien and his aides have described it as vindication. Justice Teitelbaum's decision was appealed to the Federal Court of Appeal where it was upheld. [6]